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Fewer hours, fewer people…Papa John’s?

The Affordable Care Act–which has been nicknamed Obamacare–classifies employees who work an average of thirty or more hours per week as full-time, and obligates employers to provide employer-assisted health insurance to such employees.

The Affordable Care Act was one of several lightening rod issues during the recently concluded presidential election. In the wake of the election, many employers are wondering whether this employer-assisted health insurance requirement will impose significant financial hardship, especially where the employees now eligible for coverage perform fundamental tasks and earn only modest hourly wages.

Predictably, mid-sized employers across the nation are announcing plans to reduce the hours of their employees to avoid paying for their health insurance coverage under the Affordable Care Act. Although these employers would prefer to provide coverage to these employees, they are simply uncertain whether they can afford to do so.

Of course, the media has focused like a laser on this uncertainty and anxiety. For instance, many in the media have reported recently that John Schnatter, Founder and CEO of Papa John’s Pizza, stated that Papa John’s would close stores and cut jobs because of the Affordable Care Act. In reality, Mr. Schnatter never committed to such a position on behalf of Papa John’s or any Papa John’s franchise owners. Rather, Mr. Schnatter addressed the question of a reporter purporting to be a student attending a college lecture addressed to entrepreneurs.

When asked whether he anticipated that some business owners would reduce the hours of their employees to avoid the employer-assisted health insurance requirement, Mr. Schnatter responded merely that such an approach appears to be common-sense, but actually amounts to a lose-lose proposition for all involved. Although this response did not constitute any official position for Papa John’s or any Papa John’s franchise owners, several media outlets have sought to characterize this response as reflective of a Papa John’s policy to close stores and cut jobs in response to the Affordable Care Act.

In fact, and as Mr. Schnatter revealed yesterday, Papa John’s plans to both open hundreds of stores between 2012 and 2014, and increase its workforce by over 5,000 jobs worldwide. Equally significant as it relates to all employers potentially affected by the new health insurance requirements of the Affordable Care Act, it is simply too early to take any official stance relating to current or future employees. Although employers should be engaged in an analysis of how the Affordable Care Act may impact their operations (whether with our without legal counsel), no personnel decisions should be made until this analysis is complete, and interpretative guidance has been issued by those who will implement and enforce the Affordable Care Act.

While all employers obviously want to do the right thing for their employees, many are now concerned whether they can afford to do so in light of the obligations the Affordable Care Act will likely thrust upon them. As with most things, only time will tell whether the Affordable Care Act will be modified to mitigate this potential impact (based on ongoing feedback by affected employers), or whether it will be enforced more leniently than it is written as an accommodation to affected employers.

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